"Satisfied Customer" Claims Could Be False Endorsements

Famous Horse, the operator of brand-name retail clothing chain V.I.M., had standing to pursue Lanham Act false endorsement, trademark infringement, and false advertising claims against wholesalers of counterfeit Rocawear jeans for falsely stating, in the course of marketing products to other clothing sellers, that the store operator was a satisfied customer, the U.S. Court of Appeals in New York City has determined.

False Endorsement, Trademark Infringemen

It was error for a district court to dismiss the false endorsement and trademark infringement claims on the ground that Famous Horse failed to allege facts establishing consumer confusion as to the source of its products, the appellate court said. The consumer confusion triggering the Lanham Act need not be confusion as to the origin of goods or services.

Section 43(a) specifically prohibits false or misleading representations likely to cause confusion as to affiliation, connection, or association and as to a person's sponsorship or approval of another's goods, services, or commercial activities. As to the Sec. 32 infringement claims, Famous Horse alleged that the wholesalers used Famous Horse's marks in connection with the representation that it was a satisfied customer. This conduct was likely to deceive and create confusion regarding the relationship between Famous Horse and the wholesaler's services, according to the court.

False Advertising

In the court's view, Famous Horse was clearly in competition with the wholesalers, for purposes of establishing standing to assert false advertising claims under Sec. 43(a). Famous Horse asserted that its chain of stores was known for selling genuine name-brand clothing at very low prices. Famous Horse alleged that it was uniquely affected by the wholesaler's sale of counterfeit Rocawear jeans in two ways: first, its reputation as a discount store was harmed because consumers believed that it sold Rocawear jeans at inflated prices compared to counterfeit jeans supplied by the wholesalers; second, consumers who learned of counterfeit Rocawear jeans on the market would believe that Famous Horse also peddled counterfeit clothes.

Famous Horse alleged a reasonable interest to be protected against the wholesalers' alleged false advertising as well as a reasonable basis for believing that this interest would be damaged by the alleged false advertising, the court held.

Proof of actual losses would be difficult, given that the stores were in a large market that included luxury retailers selling name brands at full price, discounters of various stripes, and numerous counterfeiters selling fake versions of name brands. The store operator alleged sufficiently plausible claims, however, to overcome a motion to dismiss.